[pamiboy]

Prices of Luxury cars and regular cars need not follow a similar linear pattern in all countries. It depends on local market conditions, the mindset of the potential clientele and how the general populace sees the premium cars vs regular cars. This would be part of their market research.

Last year there was a story published about a lady in America who was forced to get food stamps but she was driving a Mercedes C class. It is entirely plausible there. Such a situation would realistically not arise in India. The premium brands are seen differently in India vs say in USA or Europe / Germany (where Benzes are used as taxis).
Again as suggested above the premium brands are laying their foundation in India for future clients (20-30 years ahead).

To be honest, it will be much easier to move to a country where you can buy your favorite car cheaper than hoping for them to reduce prices in India . I'm not joking.

[Jeroen]

Originally Posted by mayjay

What most people are pointing out is what kind of price premium these manufacturers have over the regular mass market offerings.

So what is wrong about that? Its the manufacturers choice to price its car and the consumer choice to buy or not?

Jeroen

[lamborghini]

Originally Posted by Jeroen

So what is wrong about that? Its the manufacturers choice to price its car and the consumer choice to buy or not?

Jeroen

Firstly - I completely agree with you about not comparing car prices across countries keeping in mind their circumstances. In the USA, cars are viewed as necessity owing to poor public transport (save for big cities which have their own parking woes to deter buyers) unlike most of India and Singapore.

However, the thread isn't to discuss the premium pricing of German Luxury Cars, nor to compare their prices across countries. It basically is to question why these manufacturers have had a price hike of 'x'% across their models compared to 'x/y'% others are showing.

IMO, the reasons for that are as follows:
- As you rightly pointed out, consumers don't mind paying the premium, as these are aspirational brands. Most of those who have bought these germans will not go back to a Jap/Korean/Other brand simply because they lack the feel good factor, and other debatable factors such as ride/handling, build, etc. that they have gotten so used to enjoying. Half the customers are going to be repeat customers!
- By reducing prices the aspirational factor goes. Would you drool and aspire to own the CLA if it was priced at the same level as the Jetta / Octavia / Corolla, and the roads were flooded with them?
- It is easier to give a discount and make the customer feel as though he is getting an incredibly good deal. My friend picked up a 320D CE just before it was discontinued. He got it for 25.5L OTR. A few months later, I picked up the Laura L&K for 21.5L OTR (if we are to keep registration, etc. as equal). He keeps on reminding me every time I meet him about the deal and how I should have picked one up (I did try, though ). Similarly, he just picked up the X3 20D before the facelift arrived and is raving about his deal. Heck he is now after Audi to give him a good deal on the Q3!
- Lastly, as a company, my responsibility is to maximise shareholder value. If I am able to charge a premium and boost my profits while keeping customers happy - why not? Yes, they would be able to sell a lot more products at a lower cost, but they would be making a lower margin on each of the cars which might impact overall profitability. Also, they might lose out on the aspirational value of their brands if they focus on VFM, etc. which might be a bigger risk. Look at Mercedes for instance - it is giving Audi a tough fight for No.1 position, which is superb given that Mercedes isn't going all out launching corporate/business editions of their vehicles and thus has a substantial premium compared to its rivals. In the first quarter of 2015, it has already overtaken Audi in sales numbers!

[ANewExperience]

Originally Posted by lamborghini

IMO, the reasons for that are as follows:
- As you rightly pointed out, consumers don't mind paying the premium, as these are aspirational brands. Most of those who have bought these germans will not go back to a Jap/Korean/Other brand simply because they lack the feel good factor, and other debatable factors such as ride/handling, build, etc. that they have gotten so used to enjoying. Half the customers are going to be repeat customers!
- By reducing prices the aspirational factor goes. Would you drool and aspire to own the CLA if it was priced at the same level as the Jetta / Octavia / Corolla, and the roads were flooded with them?

Very True. IMO the raise in price is mainly to keep the aspiration factor going among the customers who don't mind paying for the premium.

I can compare this to my school days where Camlin pens were the commonly used, Hero were the elite ones. But Parker were for those who wants to stand out among the crowd and these people never minded the rate at which these prices were increasing. Sometimes, we used to get a 10% discount in some big stores and that that would bring a big smile in our faces(the discount used to be sufficient to buy a Camlin)

[pgsagar]

Our cities are already flooded with German cars and they have lost the exclusivity they once enjoyed. In my town, no one gives German trio a second look. Right now, it is Brits (JLR). Who knows someday we may see deluge of American SUVs and luxo-barges.

[quickdraw]

Absolutely agree with whats being said here. I mean I don't understand how can a manufacturer sell a CBU and CKD for the same price? Case in point when the A Class came in it was CBU. Also there is no reasoning to sell cars with high localisation at astronomical prices, they are just hurting themselves in the wrong run.

[RohanDheman]

Originally Posted by quickdraw

Absolutely agree with whats being said here. I mean I don't understand how can a manufacturer sell a CBU and CKD for the same price? Case in point when the A Class came in it was CBU. Also there is no reasoning to sell cars with high localisation at astronomical prices, they are just hurting themselves in the wrong run.

Manav, the A Class continues to be a CBU (As far as i remember). From the MFA platform, its the GLA thats now a CKD but has only seen a drop of around 2 lacs. But i am genuinely surprised at the rise in the prices. Wanted to buy the A Class for local running. Dropped the plan completely now.

Rohan

[quickdraw]

Originally Posted by RohanDheman

Manav, the A Class continues to be a CBU (As far as i remember). From the MFA platform, its the GLA thats now a CKD but has only seen a drop of around 2 lacs. But i am genuinely surprised at the rise in the prices. Wanted to buy the A Class for local running. Dropped the plan completely now.

Rohan

I'm unsure if its still a CBU but AFAIK it was initially brought in via that route.

One thing I completely fail to understand is that on one hand BMW is celebrating very high localisation by getting sachin to assemble a 5series Link and also systematically raise prices from 40-50lakhs to almost 70 for the 530d.

[lillios]

all of this has affected second hand market for these german brands as the prices of replaced gen C class w204 etc has not fallen at all when the new W205 was launched as now its in different price league

[Asifgrkhan]

Originally Posted by mayjay

To compare with countries that have a high taxation regime and car prices are high in general would not be completely right. E.g. An Ecosport starts at 20,000 euro in Netherlands. Merc c class C200 ( auto) costs 43,500 euro. Note the ratio (2.18x). In India this ratio is 40.1 / 8 = 5x. Even if you put duties being different for different segments, I don't think you can account for the difference in prices.

Singapore has high prices regardless of whether you buy a corolla or a merc.

What most people are pointing out is what kind of price premium these manufacturers have over the regular mass market offerings.

This is a great point.
We all know that due to taxation structure, we cannot compare prices between different countries. For example prices in the US will always be lesser than those in India for the same model while prices in Singapore will always be more.

What we should look at is price ratio of same products being sold in two countries. Unless it is a CBU (and we know the penal duties India accords to CBUs), there is no reason for an Audi A3 to cost 3.5x a Vento or a Santa Fe to cost 2.5x a Creta. Imagine Santa Fe sales volumes if it cost 15-18L ex showroom.

Car manufacturers always look at the volume vs margin argument and make the decision best to their bottomline. Toyota would rather sell 1500 Fortuners at 26 lakhs price with 11 lakh margin per vehicle than 5510 Fortuners (assuming all current 4000 XUV and 10 Aria owners migrate to it) at 16 lakhs with a 1 lakh margin per vehicle. Sucks for us as consumers but you cannot fault their decision.

All numbers above are fictitious other than the Aria sales volume of course.

[thesilentone]

What is the status of the Foreign Trade Agreement wherin we were supposed to get imported vehicles at substantially reduced prices? No news on that front for quite some time.

[Asifgrkhan]

Originally Posted by thesilentone

What is the status of the Foreign Trade Agreement wherin we were supposed to get imported vehicles at substantially reduced prices? No news on that front for quite some time.

Had heard about that too.

Unfortunately I have lived long enough in India to know that such a thing will never happen. It will be scuttled in a pincer action by the Revenue Department of GoI from one end and Maruti/Hyundai/Tata by the other end who will have much to lose from SE Asia manufactured or Europe manufactured vehicles being sold at the same price as those by the current big three.

Once can daydream though.

[Kumar R]

Originally Posted by Tushar

It's been a hare vs tortoise race between German luxury car prices and inflation - in this case, the hare wins.
Consider this, the C-Class used to cost 25 lakhs on the road a decade ago. Today, it's more like 50 lakhs. Just 4 years back, you could buy a Bimmer 520D for 40 lakhs. Now, it's close to 60!

10 years back, you could buy an S-Class or 7-Series for around Rs 64 lakh. Today, both cost close to Rs 1.5 Crore. That's a 250% increase in 10 years, or an average of 25% per year.

This is a very in-depth analysis, Thanks Tushar.

I found these inflation statistics for the last ten years here


CPI India 2014 5.86 %
CPI India 2013 9.13 %
CPI India 2012 11.17 %
CPI India 2011 6.49 %
CPI India 2010 9.47 %
CPI India 2009 14.97 %
CPI India 2008 9.70 %
CPI India 2007 5.51 %
CPI India 2006 6.53 %
CPI India 2005 5.57 %

Average = 8.5% (close to the average FD rate of 8.5/9.0%) [That explains why it is widely said that FDs are not making money in real terms]

Using these numbers the price increases seem to just about keep in line with inflation.

Of course, this is misleading because CPI index is disproportionately influenced by fuel and food prices which may not always be inputs for making a car.

Using your example of the S-Class, the increase is about 9% a year.

Contrast this with the price of the Polo. In 2010 December when we booked ours, the trendline (lowest) model was Rs 4.8 lakhs Ex-showroom. Today it is Rs 4.99 lakhs ex-showroom (with more features like airbags, etc). So it seems when the germans want they can keep prices from increasing drastically!

[Turbanator]

One thing I completely fail to understand is that on one hand BMW is celebrating very high localisation by getting sachin to assemble a 5series Link and also systematically raise prices from 40-50lakhs to almost 70 for the 530d.

You will hear some good news from BMW on price reduction shortly , 5 series & X5 take the biggest cuts , X1 & 3 more symbolic . I think details will be out by tomorrow

[Sahil]

Originally Posted by Turbanator

You will hear some good news from BMW on price reduction shortly , 5 series & X5 take the biggest cuts , X1 & 3 more symbolic . I think details will be out by tomorrow

That will be a first! It takes a lot of any company that's selling premium products to official MRP rather than increase discounts. Glad to see BMW taking this bold step, will wait and see how significant the drop is. Hope this creates a stir in the luxury car market and other manufactures follow suit.